Agricultural Trade Negotiations 2017 – Make or Break for India
At this stage India cannot afford to make concessions on the issue of getting
developed economies reduce their agricultural subsidies. The high level of subsidies
these countries give exposes Indian farmers to cheap imports and India still does not
have sufficient firepower in terms of safeguard measures.
Waning quantum of Indian agricultural exports in past couple of years is enervating the India’s position as a net food exporter. With tad value addition in agricultural exports, Indian manufacturers are unable to compete with the agro- processing industries of developed countries like Australia, Canada and economies of EU. Affordability of subsidies undoubtedly is a matter of concern for developing
economies like India, but it cannot be an excuse from facing the audacious bargaining process in WTO ministerial meetings.
The eleventh ministerial of the World Trade Organisation (WTO) is currently being scheduled is a crucial test, at least on three counts. One, it will be a test for the continuation of the Doha Development Round. Two, related to this, it will be a test for the very future of the rules-based multilateral trade regime. And, three, closer home, it will be a test for Indian policy makers who will be negotiating, for ensuring India’s interests as well as continuing the Doha Round.
In India, the farmers are already battling with the issues related to increase in the input cost and reducing margins along with shrinking size of the fields. EU led developed countries are putting pressure on limiting the subsidies government to 10 percent of GDP of agriculture.
India is constantly disputing the way these subsidies are being calculated, along with the Aggregate Measurement of Support, or AMS extended by the US and EU as food aid. It doesn’t make any sense to accept the food procurement price to stay below the external reference price-which is determined in 1986-88. Since then the food prices have increased many fold. This artificially inflates subsidy figures in a pseudo approach with no logical understanding. This is been stonewalled by the western world. For example, in case of soybean production in India, ironical situation arises many a times where importing seems more convenient than cultivating uncompetitively.
At this stage India cannot afford to make concessions on the issue of getting developed economies reduce their agricultural subsidies. The high level of subsidies these countries give exposes Indian farmers to cheap imports and India still does not have sufficient firepower in terms of safeguard measures. Some countries like Brazil and Argentina, which were aligned with India earlier, may break ranks with it on this issue. Asia and Africa are two such giant continent which can fetch immense economic growth through agricultural trade if the emancipation is facilitated supporting the native farmers.
Talking about Special Safeguard measure (SSM), it is an instrument which would support developing countries to deal with import surges and price dips as a result of high subsidies provided by the developed countries to agriculture products. An agreement on SSM is important for India as the applied customs duty on some of the agriculture products is at the bound rate, meaning it can’t be raised further.
These include products such as chicken legs, apples, olive oils and rice. For Indian agricultural exports, market access and SPS (Sanitary and Phytosanitary) measures are obfuscating pillars too, which are camouflaging India’s position as a global leader in agricultural trade.
Recently US has refused to support a decision on a permanent solution for public stockholding subsidies sought by India and other developing countries, has aggravated India’s scenario with respect to agricultural trade. Now maintaining the food stockpile will be irrelevant for India which till now had been the most sorted approach. Slowly and gradually India is losing its position as a global negotiator.
Anything which is certain and robust for India is its pragmatic domestic trade policies and up gradation on NTBs which are widely applied. There is huge scope for exports of processed agricultural products, but for that we need effective cold chains. The government needs to put in money to push infrastructure if exports have to be increased. Improvement and amelioration in warehousing infrastructure would also
counter inflation concerns due to seasonal factors such as poor monsoon rains.
Between 2013-14 and 2016-17, agricultural exports fell by 22% while imports increased by 62%. As a result, the trade surplus has fallen by 70%, which is seriously a discouraging signal especially for a net agriculture exporter. Do we really need to bring a paradigm shift in Indian agricultural trade, is what our policy maker needs to think?